{"id":156388,"date":"2021-03-15T09:24:42","date_gmt":"2021-03-15T14:24:42","guid":{"rendered":"https:\/\/ycgts.shop\/?p=156388"},"modified":"2024-05-22T12:18:36","modified_gmt":"2024-05-22T17:18:36","slug":"draftkings-marketing-spend-out-of-touch","status":"publish","type":"post","link":"https:\/\/ycgts.shop\/draftkings-marketing-spend-out-of-touch\/","title":{"rendered":"Cold Water Poured On DraftKings Predicted Marketing Spend"},"content":{"rendered":"\n<p>An investor presentation is always likely to contain some optimistic scenarios, but an <a class=\"rank-math-link\" href=\"https:\/\/draftkings.gcs-web.com\/investor-relations-dkng\" target=\"_blank\" rel=\"noopener\">online showcase<\/a> from <a class=\"rank-math-link\" href=\"https:\/\/ycgts.shop\/reviews\/draftkings-sportsbook\/\">DraftKings<\/a> last week appeared to contain a doubtful assumption on future DraftKings marketing spend.<\/p>\n\n\n\n\n\n\n\n<p>The company has reason to be bullish on its prospects for the years ahead. Headlines were there for the taking on the new estimates for the total addressable market in both <a class=\"rank-math-link\" href=\"https:\/\/ycgts.shop\/sports\/\">US sports betting<\/a> and <a class=\"rank-math-link\" href=\"https:\/\/ycgts.shop\/casino\/\">online casino gambling<\/a> and DraftKings\u2019 market share hopes.<\/p>\n\n\n\n<p>Yet, in its estimate for what the balance sheet might look like \u2018at maturity\u2019 in five years, there appeared a very bullish assumption on DraftKings marketing budget.<\/p>\n\n\n\n<p>To maintain what it sees at an achievable market share of up to 30% in sports betting and 20% in online gaming, DraftKings said it expected to be laying out less than 10% of projected net revenue of $5.4bn or $500m on marketing.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Money\u2019s too tight<\/h2>\n\n\n\n<p>Now, that stated $500m is undoubtedly a large enough budget for any aspiring CMO, and it can go a long way.<\/p>\n\n\n\n<p>But in an environment where your rivals are likely to be spending whatever it takes to either match or challenge your market leadership, it might come to be seen as being a bit on the skinny side.<\/p>\n\n\n\n<p>To take a couple of pertinent examples. Globally, in 2020 major rival Flutter spent a total of \u00a3991m or $1.38bn on sales and marketing out of its global net revenues of \u00a34.40bn ($6.1bn) or around 23%.<\/p>\n\n\n\n<p>And just this week, Rush Street Interactive, which operates the <a class=\"rank-math-link\" href=\"https:\/\/ycgts.shop\/reviews\/betrivers\/\">BetRivers Sportsbook<\/a>, in its fourth-quarter earnings call, also said it spent 23% of total revenues on marketing during the quarter. More to the point, CEO Greg Carlin said RSI\u2019s 2020 marketing expenses had been \u201cmodest,\u201d and its improved cash position would allow it to \u201csignificantly increase\u2019 its spend in 2021.<\/p>\n\n\n\n<p>\u201cTen percent of NGR sounds unbelievably low in a land-grab market such as the US,\u201d says Andy May, a UK-based marketing consultant with expertise in the gambling space.<\/p>\n\n\n\n<p>May points to comments from Entain about CPAs (costs per acquisition) in the $500 region and suggests that presently CPAs of up to $700 \u201care not uncommon,\u201d particularly given this is still early days in all state-by-state markets.<\/p>\n\n\n\n<p>\u201cEverything I hear is that US CPAs are very high as brands fight hard for a share of voice in media channels during these critical early market evolution months,\u201d says May.<\/p>\n\n\n\n<p>As May suggests, DraftKings benefits from strong existing brand awareness, contributing to their confidence around future spending. Indeed, during the investor presentation, DraftKings CEO Jason Robins pulled up a slide of the company\u2019s own commissioned quarterly brand tracking data, which shows that DraftKings has resonance with a large cohort of current and potential customers.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Top of mind<\/h2>\n\n\n\n<p>Across <a href=\"https:\/\/ycgts.shop\/fantasy\/\">DFS<\/a>, sports betting, and igaming, the stats show DraftKings is \u2018top of mind\u2019 with 34% of fantasy players and the preferred supplier for 38%. Those numbers are only slightly behind at 31% and 29% in sports, and switching to igaming places those numbers at 25% and 29%.<\/p>\n\n\n\n<p>In each category, DraftKings is significantly ahead of its leading competitor, and such data points can help when it comes to decisions regarding levels of marketing spend.<\/p>\n\n\n\n<p>But as John English, CEO at consultancy WeBe Gaming, is quick to point out, to get to that level of consumer confidence, both DraftKings and its primary DFS rival <a href=\"https:\/\/ycgts.shop\/reviews\/fanduel\/\">FanDuel<\/a> spent a \u201cfortune\u201d in marketing to reach these levels of recognition.<\/p>\n\n\n\n<p>DraftKings \u201cdid a great job,\u201d he adds, but sports betting is a new market, and anyone who thinks the marketing merry-go-round will stop is probably kidding themselves.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cThere will be more competition to come, and certainly there will be more groups fighting for the customer acquisition,\u201d English adds. \u201cIt\u2019s happening now. That will drive the cost of a quality spending customer up considerably, not down.\u201d<\/p>\n<\/blockquote>\n\n\n\n<p>Moreover, English says it\u2019s way too early to call the market as being settled. \u201cI would expect costs to rise with the tide as new or consolidated companies battle for the same or new customers,\u201d he says.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cThere is also the point of effective customer retention, and the ongoing cost and creativity of marketing campaigns will be around forever, and spending will continue to rise especially if you want to create and maintain brand loyalty.\u201d<\/p>\n<\/blockquote>\n\n\n\n<p>May agrees: \u201cIn terms of overall marketing spend, a European average of 23-25% of NGR is normal, so in the US, I would expect the percentage to be significantly higher given the overt focus on acquisition marketing. DraftKings may be slightly lower, but 10% sounds unrealistic and highly unlikely in my view.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"<p>An investor presentation is always likely to contain some optimistic scenarios, but an online showcase from DraftKings last week appeared to contain a doubtful assumption on future DraftKings marketing spend.<\/p>\n","protected":false},"author":13,"featured_media":156394,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-156388","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry"],"acf":[],"taxonomy_info":{"category":[{"value":2,"label":"Industry Updates"}]},"featured_image_src_large":["https:\/\/ycgts.shop\/wp-content\/uploads\/2021\/03\/DraftKings-marketing-spend-1024x439.png",1024,439,true],"author_info":{"display_name":"Scott Longley","author_link":"https:\/\/ycgts.shop\/author\/scottl\/"},"comment_info":"","category_info":[{"term_id":2,"name":"Industry Updates","slug":"industry","term_group":0,"term_taxonomy_id":2,"taxonomy":"category","description":"Latest betting industry updates and major developments.","parent":0,"count":359,"filter":"raw","cat_ID":2,"category_count":359,"category_description":"Latest betting industry updates and major developments.","cat_name":"Industry Updates","category_nicename":"industry","category_parent":0}],"tag_info":false,"_links":{"self":[{"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/posts\/156388","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/comments?post=156388"}],"version-history":[{"count":3,"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/posts\/156388\/revisions"}],"predecessor-version":[{"id":207011,"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/posts\/156388\/revisions\/207011"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/media\/156394"}],"wp:attachment":[{"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/media?parent=156388"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/categories?post=156388"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ycgts.shop\/wp-json\/wp\/v2\/tags?post=156388"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}